This study scrutinizes debt consolidation from 1958 to 1965, with a focus on the pivotal year 1960. The study argues that this consolidation is a product of preceding economic policies (1946-1958) and explores the preconditions leading to debt emergence. It utilizes quantitative data from the Directorate of State Archives and Turkish Diplomatic Archives, alongside Grand National Assembly minutes, the Official Gazette, and periodicals. Grand National Assembly minutes serve as the primary source. This unique study offers a comprehensive historical narrative, addressing both quantitative and qualitative aspects of debt consolidation, filling a notable gap in research.

Two pivotal mechanisms shaped Türkiye’s economic policies in the post-World War II period. First, despite criticism, a deliberate devaluation in September 1946 aimed to align domestic and international trade terms, thereby promoting liberal integration into the global economic system. Second, although never implemented, the 1947 Türkiye Economic Development Plan emphasized allowing the private sector to develop “with complete freedom and safety” throughout the 1950s. As the primary actors shaping Türkiye’s post-1945 era, commercial capitalists played a critical role. Both agribusiness merchants and importers of manufactured goods and means of production benefited from the 1946 devaluation and the subsequent liberalized foreign trade regime. These conditions facilitated capital accumulation for both agribusiness merchants and large landowners involved in exports and imports dealing with manufactured goods and means of production.

The 1946 devaluation was perceived positively as it stimulated agricultural production, bolstered heavily exported goods, and fostered expanded trade. Indeed, owners of commercial capital played a decisive role in the liberalization of imports in 1950. With devaluation and liberalized imports, economic growth averaged 10% per annum until the first quarter of the 1950s, with a significant share of agricultural output at the forefront. However, persistent challenges in the form of balance of payment deficits emerged as a consequence of the economic expansion. The 1954 pamphlet titled “Kalkınan (Developing) Türkiye”, published by the Democrat Party, asserted that a deficit in the balance of payments was deemed necessary to “equip and develop the country.” Concurrently, the global discourse echoed the sentiment that “Development is not possible without foreign aid!” 

By the first quarter of the 1950s, when the financing capacities for foreign trade had reached their limits, a shift in the developmental paradigm occurred. The focus turned towards considering domestic conditions as pivotal factors for development. Efforts to address external dependence involved expanding credit and domestic demand facilities provided by institutions such as the Central Bank, state banks, and State Economic Enterprises (SEEs). Despite these endeavors, economic policies encountered an impasse in 1958, exacerbated by the inclusion of inflation alongside the persistent foreign trade deficit. In response to these challenges, a stabilization program was implemented in 1958. This initiative sought to resolve existing problems through strategies such as removing SEEs from the state budget, regulating the money and credit markets, streamlining the foreign exchange system, promoting exports, and establishing a price system aligned with global prices. However, it is noteworthy that this program marked the commencement of a consolidation phase for preceding economic policies.

This paper examines the consolidation of public and nationalized private sector debt in Türkiye between 1958 and 1965, which amounted to approximately 16 billion TL. Although the consolidation process started in 1958, the actual consolidation took place in 1960 and extended until 1965. The consolidated debts were gradually liquidated in a prescribed manner, with maturities of 10–100 years and interest rates ranging from 0.5 6%. In this study, this consolidation process is referred to as gradual consolidation. Private sector debts stemmed from foreign trade and imports on credit, liquidated banks and farmers’ debts. Farmers’ resort to loan sharks to settle their debts was emphasized in connection with delays in the repayment of loans from Ziraat Bank and Agricultural Credit Cooperatives. Moreover, the process that started in the second half of the 1950s with the liquidation of small banks in the banking sector and the enactment of Law No.7129 continued after the 1960 coup. Public debt consists of the debt of public institutions, enterprises, the Central Bank and other public banks. The consolidated public debt was not redeemed until 1973, with the enactment of Law No. 154 in 1963 and additional laws, and was then liquidated with interest-free government domestic debt securities until 1985. In conclusion, the study reveals that public debt and certain private sector debts, which emerged as a result of the economic policies of the 1946–1958 period, were gradually deferred to the 1970s and 1980s through debt relief.